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September 15, 2014

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Paul Krugman: How to Get It Wrong

Posted: 15 Sep 2014 12:24 AM PDT

What "accounts for the terrible performance of Western economies since 200"?:

How to Get It Wrong, by Paul Krugman, Commentary, NY Times: Last week I participated in a conference organized by Rethinking Economics... And Mammon knows that economics needs rethinking...
It seems to me, however, that it's important to realize that the enormous intellectual failure of recent years took place at several levels. Clearly, economics as a discipline went badly astray... But the failings of economics were greatly aggravated by the sins of economists, who far too often let partisanship or personal self-aggrandizement trump their professionalism. Last but not least, economic policy makers systematically chose to hear only what they wanted to hear. And it is this multilevel failure — not the inadequacy of economics alone — that accounts for the terrible performance of Western economies since 2008.
In what sense did economics go astray? Hardly anyone predicted the 2008 crisis... More damning was the widespread conviction among economists that such a crisis couldn't happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly. ...
Still, many applied economists retained a more realistic vision of the world, and textbook macroeconomics, while it didn't predict the crisis, did a pretty good job of predicting how things would play out in the aftermath. ...
But while economic models didn't perform all that badly..., all too many influential economists did — refusing to acknowledge error, letting naked partisanship trump analysis, or both. ...
But would it have mattered if economists had behaved better? Or would people in power have done the same thing regardless?
If you imagine that policy makers have spent the past five or six years in thrall to economic orthodoxy, you've been misled. On the contrary, key decision makers have been highly receptive to innovative, unorthodox economic ideas — ideas that also happen to be wrong but which offered excuses to do what these decision makers wanted to do anyway. ...
I'm not saying either that economics is in good shape or that its flaws don't matter. It isn't, they do, and I'm all for rethinking and reforming a field.
The big problem with economic policy is not, however, that conventional economics doesn't tell us what to do. In fact, the world would be in much better shape than it is if real-world policy had reflected the lessons of Econ 101. If we've made a hash of things — and we have — the fault lies not in our textbooks, but in ourselves.

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Posted: 15 Sep 2014 12:06 AM PDT

'Stupidest Article Ever Published?'

Posted: 14 Sep 2014 09:23 AM PDT

Via email, I was asked if this is the "stupidest article ever published?":

The Inflation-Debt Scam

If not, it's certainly in the running.

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